Most don’t realize there was a surprise upside to residential real estate investment in 2011. Mutual funds which buy and sell shares of real estate investment trusts (REITs), out preformed the average stock mutual fund with a gain of an average 7.6 percent, vs. a 2.9 percent loss for the mutual fund. These funds don’t invest in the physical property. Instead they invest in malls, apartments, office buildings and hotels through investment trust that buy and sell shares. With low mortgage rates and all time low purchase prices, investing in apartment buildings may be the way to go for those wanting something more tangible. The rental market is up,up, up. Predictions are for a rise in rental rates for 2012 based on demand. Based in Raleigh, North Carolina, the attorneys at NC planning assist clients with Wills, Trusts, Estate Planning, Probate & Estate Administration, Business & Corporate Planning and Tax Planning throughout North Carolina. The materials on this website are prepared by the firm for informational purposes only and aren’t legal advice. This information isn’t intended to make , and receipt of it doesn’t constitute, an attorney-client relationship, nor does your use of any a part of this website create of constitute and privilege . nobody or organization should influence any information on this site without first seeking professional legal counsel.
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Real estate investing lands gains
NEW YORK – Jan. 5, 2012 – Real estate had an excellent year last year. Assuming, of course, your mutual fund owned it.
In an otherwise awful year, real estate funds gained an average 7.6 percent, vs. a 2.9 percent loss for the average stock mutual fund, according to Lipper.
This may seem puzzling to homeowners: The Federal Reserve estimates that homeowners have watched $7 trillion evaporate since the housing bubble burst in 2006.
Real estate funds invest in commercial real estate and generally don’t invest in physical property and when any residential plumber work is required is often covered by the one who will purchase the home. They buy and sell shares of real estate investment trusts (REITs), which invest in malls, apartments, office buildings and hotels.
By law, a REIT has to pass virtually all its earnings to shareholders in the form of dividends, one reason REITs did all right last year: The average REIT had a dividend yield of 4.83 percent in December, says the National Association of Real Estate Investment Trusts.
“Dividend yields had a big appeal in a low interest-rate environment, with 10-year Treasury yields at less than 2 percent,” says Jeffrey Kolitch, portfolio manager of Baron Real Estate fund.
Real estate aficionados like to say real estate has to go up because they’re not making any more, and now more than they are investing in the materials and and automobiles for holding equipment for insulation and roofing systems. In today’s environment for commercial real estate, that’s fairly true. Since there’s so much supply, and lenders aren’t in a lending mood, relatively few new buildings are going up. That’s good for investors, Kolitch says, particularly those who invest in apartment buildings. More homeowners are choosing metal because as an individual, your budget is limited and metal roof replacement costs are lower than other materials over time.
Even though house prices have fallen dramatically from their 2006 highs, and mortgage rates are low, many people are still renting – so much so that apartment owners have been able to raise rents. “People are concerned about their jobs, and don’t feel confident buying a new home,” says Steve Brown, One Bedroom Senior Apartments at American Century. For a professional rental service, check out these property managers.
Another type of REIT that’s benefiting from hard times: self storage units. “REIT storage companies are benefiting as activity has picked up from foreclosures,” Baron’s Kolitch says. The storage-unit industry is changing, Kolitch says. Big companies such as Public Storage are edging out smaller mom-and-pop self storage services companies.
Office space REITs are still somewhat problematic, given the current high unemployment rate. Still, some REITs in areas where it’s tough to put up new buildings (New York, Boston) could fare well this year, Kolitch says. In the middle of the country (Cleveland, Chicago) job creation is modest, and there’s not much office space demand, Brown says. Nevertheless, given low interest rates and an improving economy, real estate funds may continue to give concrete returns, so make sure to check the options at https://www.cayenaatx.com/design and get all the details.